Canada's Patent Deficit

Regular readers of this column will be familiar with my concern over what I have called Canada's “digital deficit.” The argument is simple: relative to our key trading partners, and especially the United States, we are not as innovative and have not invested as heavily in information technology and other productivity-enhancing devices, systems and methodologies (such as state-of-the-art e commerce platforms). This gap – this deficit – threatens our future prosperity.

Our digital deficit manifests itself in many different ways. For example, roughly 3 per cent of our workforce is made up of people in information and telecommunications jobs. In leading digital countries, that percentage is between 6 and 8 per cent.

Or consider research and development spending as a percentage of gross domestic product. In leading technology powers, that figure is between 2.5 and 3.5 per cent. In Canada, we clock in at 1.7 per cent (and our trend is downward).

Moreover, in the top tech countries of the world, 65 per cent or more of the R&D spending is done by companies, thereby fully exposing it to the discipline and dynamics of global markets. In Canada, by contrast, only 50 per cent of R&D is performed within the private sector.

> INNOVATION THROUGH PATENTS
Patents are another metric related to a country's performance in the all important global innovation race. Patents are an important barometer of innovative achievement because, almost by definition, a patent is an encapsulation of a burst of innovation and technological progress. A patent tells the world, “Look, I'm a new invention. I'm at the cutting edge in my field.”

As a broad generalization, countries with companies and inventors that file for many patents tend to be far more innovative than those with fewer patent filings. Indeed, the number of patents filed in a particular field speaks volumes when comparing one country's performance to another in the world of applied innovation.

> WIPO TELLS ALL
The World Intellectual Property Organization facilitates cross-comparisons between countries in respect of patents. WIPO tracks the number of patents filed worldwide each year, and then slices and dices the data by technology field and the national origin of the inventors (the names of the individuals on the patent application).

So, how is Canada's performance on the patent front relative to its peers? Not good. Consider this first chart (Exhibit A, on the following page), which shows how many patents were filed (by origin of country) between 2007 and 2011 in the category of “information and communications technology” (I have added the “tiers”).

> PUNCHING BELOW OUR WEIGHT
Some will look at the below chart and argue that of course more populous countries are ahead of us — there are 10 times more people in the United States than in Canada, so presumably the US will produce 10 times our output of patents.

This certainly makes sense. But when you compare Canada and our neighbours to the south, the differential can't be explained away with a scale argument. The US may have 10 times our population — but it produces 20 times as many patents.

Indeed, WIPO has another chart (Exhibit B) that drives this home dramatically: number of patents (by country of origin) relative to the population of such country; that is, number of patents filed relative to every 1 million of population (in 2013). You'll find the top 20 countries below.

No, that's not a typo — it really is the fact that Canada does not appear on this list. We are simply not among the top 20 countries in terms of patents filed per capita. And if you will indulge me one last WIPO chart, the next one (Exhibit C) correlates number of patents relative to the size of the economy (number of patents in 2012 relative to every $100 billion of GDP, normalized in US dollars).

Once again, we are not in the top 20 countries of the world, which is astounding, because Canada has the 11th largest economy in the world.

By the way, for those of you reading the middle chart carefully, you may have noticed Korea appears twice. The first entry is South Korea, the land of Samsung and Hyundai. But the second Korea is – you guessed it – North Korea, the hermit kingdom itself. When you control for the size of our respective populations, North Korea files more patents than Canada. Who would have guessed that!

These patent statistics have strong lessons for us on a number of fronts, including on the future of patent lawyers, patent agents and technology lawyers more broadly in Canada. In addition, they have serious implications for the state of our economy in the knowledge-intensive 21st century.

So what do we do about this sorry state of patent affairs? That is the subject of next month's column.

George Takach is a senior partner at McCarthy Tétrault LLP and the author of Computer Law.